Vertical Analysis of Income Statement
The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Calvin Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways.
Current Year | Previous Year | |||||||
Revenues: | ||||||||
Admissions | $106,872 | $119,739 | ||||||
Event-related revenue | 147,376 | 142,284 | ||||||
NASCAR broadcasting revenue | 187,392 | 177,354 | ||||||
Other operating revenue | 46,360 | 61,623 | ||||||
Total revenue | $488,000 | $501,000 | ||||||
Expenses and other: | ||||||||
Direct expense of events | $93,696 | $95,190 | ||||||
NASCAR purse and sanction fees | 120,048 | 120,240 | ||||||
Other direct expenses | 15,616 | 19,539 | ||||||
General and administrative | 207,888 | 234,969 | ||||||
Total expenses and other | $437,248 | $469,938 | ||||||
Income from continuing operations | $50,752 | $31,062 |
a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Round to one decimal place. Enter all amounts as positive numbers.
Calvin Motorsports, Inc. | ||||
Comparative Income Statement (in thousands of dollars) | ||||
For the Years Ended December 31 | ||||
Current Year Amount | Current Year Percent | Prior Year Amount | Prior Year Percent | |
Revenues: | ||||
Admissions | $106,872 | % | $119,739 | % |
Event-related revenue | 147,376 | % | 142,284 | % |
NASCAR broadcasting revenue | 187,392 | % | 177,354 | % |
Other operating revenue | 46,360 | % | 61,623 | % |
Total revenue | $488,000 | % | $501,000 | % |
Expenses and other: | ||||
Direct expense of events | $93,696 | % | $95,190 | % |
NASCAR purse and sanction fees | 120,048 | % | 120,240 | % |
Other direct expenses | 15,616 | % | 19,539 | % |
General and administrative | 207,888 | % | 234,969 | % |
Total expenses and other | $437,248 | % | $469,938 | % |
Income from continuing operations | $50,752 | % | $31,062 | % |
b. While overall revenue some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue as a percent of total revenue by 3 percentage points, while the percent of admissions revenue to total revenue by 2 percentage points. Overall, it appears that income from continuing operations has significantly improved because of .
In: Accounting
Ruston Company Balance Sheet As of January 3, 2019 (amounts in thousands) |
|||
---|---|---|---|
Cash | 9,000 | Accounts Payable | 1,200 |
Accounts Receivable | 3,400 | Debt | 3,600 |
Inventory | 5,100 | Other Liabilities | 2,100 |
Property Plant & Equipment | 17,500 | Total Liabilities | 6,900 |
Other Assets | 600 | Paid-In Capital | 5,900 |
Retained Earnings | 22,800 | ||
Total Equity | 28,700 | ||
Total Assets | 35,600 | Total Liabilities & Equity | 35,600 |
Transfer the journal entries to T-accounts for the transactions below, compute closing amounts for the T-accounts, and construct a final balance sheet to answer the question.
Journal amounts in thousands
Date | Account and Explanation | Debit | Credit |
---|---|---|---|
Jan 4 | Cash | 55 | |
Debt | 55 | ||
Borrowed money from bank | |||
Jan 5 | Inventory | 14 | |
Accounts Payable | 14 | ||
Bought manufacturing supplies on credit | |||
Jan 6 | Accounts Payable | 7 | |
Cash | 7 | ||
Paid money owed to supplier | |||
Jan 7 | Cash | 12 | |
Inventory | 10 | ||
Retained Earnings | 2 | ||
Sold and delivered product to customer | |||
Jan 8 | Cash | 75 | |
Paid-In Capital | 75 | ||
Issued stock | |||
Jan 9 | Property, Plant & Equipment | 44 | |
Cash | 44 | ||
Paid cash for machine | |||
Jan 10 | Cash | 13 | |
Accounts Receivable | 13 | ||
Received customer payment |
What is the final amount in Total Assets?
Please specify your answer in the same units as the balance sheet.
In: Accounting
DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations.
Month | ||||||||
1 | 2 | 3 | 4 | |||||
Throughput time (days) | ? | ? | ? | ? | ||||
Delivery cycle time (days) | ? | ? | ? | ? | ||||
Manufacturing cycle efficiency (MCE) | ? | ? | ? | ? | ||||
Percentage of on-time deliveries | 78 | % | 74 | % | 71 | % | 68 | % |
Total sales (units) | 3780 | 3618 | 3433 | 3304 | ||||
Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months:
Average per Month (in days) | |||||||||
1 | 2 | 3 | 4 | ||||||
Move time per unit | 0.7 | 0.5 | 0.6 | 0.6 | |||||
Process time per unit | 2.3 | 2.2 | 2.1 | 2.0 | |||||
Wait time per order before start of production | 25.0 | 27.4 | 30.0 | 32.4 | |||||
Queue time per unit | 4.9 | 5.6 | 6.4 | 7.3 | |||||
Inspection time per unit | 0.4 | 0.5 | 0.5 | 0.4 | |||||
Required:
1-a. Compute the throughput time for each month.
1-b. Compute the delivery cycle time for each month.
1-c. Compute the manufacturing cycle efficiency (MCE) for each month.
2. Evaluate the company’s performance over the last four months.
3-a. Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE.
3-b. Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE.
In: Accounting
Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 6%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $106 to purchase these supplies.
For years, Worley believed that the 6% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:
Activity Cost Pool (Activity Measure) | Total Cost | Total Activity | |||
Customer deliveries (Number of deliveries) | $ | 567,000 | 7,000 | deliveries | |
Manual order processing (Number of manual orders) | 450,000 | 6,000 | orders | ||
Electronic order processing (Number of electronic orders) | 270,000 | 15,000 | orders | ||
Line item picking (Number of line items picked) | 693,000 | 420,000 | line items | ||
Other organization-sustaining costs (None) | 660,000 | ||||
Total selling and administrative expenses | $ | 2,640,000 | |||
Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $34,000 to buy from manufacturers):
Activity |
||
Activity Measure | University | Memorial |
Number of deliveries | 11 | 24 |
Number of manual orders | 0 | 45 |
Number of electronic orders | 16 | 0 |
Number of line items picked | 130 | 230 |
Required:
1. Compute the total revenue that Worley would receive from University and Memorial.
2. Compute the activity rate for each activity cost pool.
3. Compute the total activity costs that would be assigned to University and Memorial.
4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $34,000 cost of goods sold that Worley incurred serving each hospital.)
In: Accounting
Adjustment data:On November 1, 2017, Splish Brothers Inc. had
the following account balances. The company uses the perpetual
inventory method.
Debit | Credit | |||||
---|---|---|---|---|---|---|
Cash | $7,920 | Accumulated Depreciation—Equipment | $880 | |||
Accounts Receivable | 1,971 | Accounts Payable | 2,992 | |||
Supplies | 757 | Unearned Service Revenue | 3,520 | |||
Equipment | 22,000 | Salaries and Wages Payable | 1,496 | |||
$32,648 | Common Stock | 17,600 | ||||
Retained Earnings | 6,160 | |||||
$32,648 |
During November, the following summary transactions were
completed.
Nov. | 8 | Paid $3,124 for salaries due employees, of which $1,628 is for November and $1,496 is for October. | |
---|---|---|---|
10 | Received $1,672 cash from customers in payment of account. | ||
11 | Purchased merchandise on account from Dimas Discount Supply for $7,040, terms 2/10, n/30. | ||
12 | Sold merchandise on account for $4,840, terms 2/10, n/30. The cost of the merchandise sold was $3,520. | ||
15 | Received credit from Dimas Discount Supply for merchandise returned $264. | ||
19 | Received collections in full, less discounts, from customers billed on sales of $4,840 on November 12. | ||
20 | Paid Dimas Discount Supply in full, less discount. | ||
22 | Received $2,024 cash for services performed in November. | ||
25 | Purchased equipment on account $4,400. | ||
27 | Purchased supplies on account $1,496. | ||
28 | Paid creditors $2,640 of accounts payable due. | ||
29 | Paid November rent $330. | ||
29 | Paid salaries $1,144. | ||
29 | Performed services on account and billed customers $616 for those services. | ||
29 | Received $594 from customers for services to be performed in the future. |
On November 1, 2017, Splish Brothers Inc. had the following account balances. The company uses the perpetual inventory method.
1. | Supplies on hand are valued at $1,408. | |
2. | Accrued salaries payable are $440. | |
3. | Depreciation for the month is $220. | |
4. | $572 of services related to the unearned service revenue has not been performed by month-end. |
|
In: Accounting
Question 2 - 750 words
(A FRESH ANSWER IS REQUIRED TAKING IN CONSIDERATION THE
FULL QUESTION AND TOPIC. AND PLEASE TAKE INTO ACCOUNT THE WORD
COUNT REQUIRED. PLEASE DONT REWRITE THE EXISTING ANSWERS AVAILABLE
AS THEY ARE NOT ACCORDING TO REQUIREMENT AND NOT RELATING TO WHAT
IS REQUIRED.)
The AASB Framework OB2 states that: "The objective of general
purpose financial reporting is to provide financial information
about the reporting entity that is useful to existing and
potential investors, lenders and other creditors in making
decisions about providing resources to the entity. Those decisions
involve buying, selling or holding equity and debt
instruments,
and providing or settling loans and other forms of credit"
Does the identification of particular groups of users have
implications for the measurement basis that will ultimately be
adopted by the AASB for use in Australia? Justify your position.
In
your response you should consider whether fair values or historical
costs would be more relevant to the users identified in the AASB
Framework.
In: Accounting
It is February 16, 2018, and you are auditing Davenport Corporation’s financial statements for 2017 (which will be issued in March 2018). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenport’s accounts receivable is $50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss on doubtful accounts for 2017 might be appropriate. Jim replies, “Why should we make an adjustment? Ted Travis, the president of Travis Company, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2018, so let’s wait and see what happens; we can always make an adjustment later this year.”
Required: Write a memo:-
In your position as the external auditor of Davenport Corporation, prepare a memo to Jim Davenport and address the following:
In: Accounting
Single Plantwide Rate and Activity-Based Costing
Whirlpool Corporation conducted an activity-based costing study of its Evansville, Indiana, plant in order to identify its most profitable products. Assume that we select three representative refrigerators (out of 333): one low-, one medium-, and one high-volume refrigerator. Additionally, we assume the following activity-base information for each of the three refrigerators:
Three Representative Refrigerators |
Number of Machine Hours |
Number of Setups |
Number of Sales Orders |
Number of Units |
||||
Refrigerator—Low Volume | 120 | 21 | 63 | 600 | ||||
Refrigerator—Medium Volume | 310 | 20 | 140 | 1,550 | ||||
Refrigerator—High Volume | 960 | 14 | 210 | 4,800 |
Prior to conducting the study, the factory overhead allocation was based on a single machine hour rate. The machine hour rate was $600 per hour. After conducting the activity-based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows:
Machining Activity |
Setup Activity |
Sales Order Processing Activity |
|||||
Activity rate | $580 | $900 | $200 |
a. Complete the following table, using the single machine hour rate to determine the per-unit factory overhead for each refrigerator (Column A) and the three activity-based rates to determine the activity-based factory overhead per unit (Column B). Finally, compute the percent change in per-unit allocation from the single to activity-based rate methods (Column C).
If required, round all per unit answers to the nearest cent. Round percents to one decimal place. For column C, use the minus sign to indicate a negative or decrease.
Column A | Column B | Column C | |
Product Volume Class |
Single Rate Overhead Allocation Per Unit |
ABC Overhead Allocation Per Unit |
Percent Change in Allocation |
Low | $ | $ | % |
Medium | $ | $ | % |
High | $ | $ | % |
The machine hour rate is greater under the single rate method than under the activity-based method because 100% of the factory overhead is is allocated by machine hours under the single rate method. However, only a portion of the factory overhead is allocated under the machine rate method using activity-based costing. The remaining factory overhead is allocated using the . Thus, the numerator for for determining the machine hour rate under activity-based costing must be less than the numerator under the single machine hour rate method.
c. Interpret Column C in your table from part (A).Column C indicates that under activity-based costing the low-volume product has a per-unit cost than calculated under the single rate method. In contrast, under activity-based costing the high-volume product has a per-unit cost than calculated under the single rate method. This result will occur when there are activities that occur in proportions different from their volumes. In this case, volume products have setups and sales orders occurring in higher proportions of total setups and sales orders than their proportion of machine hours to total machine hours. The opposite is the case for the volume product. Thus, the lower-volume products are produced and ordered in batch sizes compared to the higher-volume product. This implies that Whirlpool may wish to simplify its product line by eliminating some of the volume products or by attempting to reduce the overall cost of setup and sales order processing activities.
In: Accounting
how are the classes and stages of benchmarking supportive to efficiencies in product costing and Utilizing the Kaizan costing system
In: Accounting
Scenario
Cartech Manufacturing is engaged in the production of replacement parts for automobiles. One plant specializes in the production of two parts: Part 271 and Part 342. Part 271 produces the highest volume of activity, and for many years it was the only part produced by the plant. Five years ago, Part 342 was added. Part 342 was more difficult to manufacture and required special tooling and setups. Profits increased for the first three years after the addition of the new product. In the past two years, however, the plant has faced intense competition, and its sales of Part 271 have dropped. In fact, the plant showed a small loss in the most recent reporting period. Much of the competition was from foreign sources, and the plant manager was convinced that the foreign producers were guilty of selling the part below the cost of producing it. The following conversation between Tricia Goodson, plant manager, and Jackson Fielding divisional marketing manager, reflects the concerns of the division about the future of the plant and its products.
Jackson: You know, Tricia, the divisional manager is really concerned about the plant’s trend. He indicated that in this budgetary environment, we can’t afford to carry plants that don’t show a profit. We shut one down just last month because it couldn’t handle the competition.
Tricia: Joe, you and I both know that Part 271 has a reputation for quality and value. It has been a mainstay for years. I don’t understand what’s happening.
Jackson: I just received a call from one of our major customers concerning Part 271. He said that a sales representative from another firm offered the part at $20 per unit-- $11 less than what we charge. It’s hard to compete with a price like that. Perhaps the plant is simply obsolete.
Tricia: No. I don’t buy that. From my sources, I know we have good technology. We are efficient. And it’s costing a little more than $21 to produce that part. I don’t see how these companies can afford to sell it so cheaply. I’m not convinced that we should meet the price. Perhaps a better strategy is to emphasize producing and selling more of Part 342. Our margin is high on this product, and we have virtually no competition for it.
Jackson: You may be right. I think we can increase the price significantly and not lose business. I called a few customers to see how they would react to a 25 percent increase in price, and they all said that they would still purchase the same quantity as before.
Tricia: It sounds promising. However, before we make a major commitment to Part 342, I think we had better explore other possible explanations. I want to know how our production costs compare with those of our competitors. Perhaps we could be more efficient and find a way to earn our normal return on Part 271. The market is so much bigger for this part. I’m not sure we can survive with only Part 342. Besides, my production people hate that part. It’s very difficult to produce.
After her meeting with Jackson, Tricia requested an investigation of the production costs and comparative efficiency. She received approval to hire Wake Consulting Group to make an independent investigation.
You, as the staff accountant for Wake Consulting Group, have uncovered the following costs and activities associated with the two products.
Part 271 |
Part 342 |
|
Production |
500,000 |
100,000 |
Selling Price |
$31.86 |
$24.00 |
Prime costs per unit |
$9.53 |
$8.26 |
Number of production runs |
100 |
200 |
Receiving orders |
400 |
1,000 |
Machine hours |
125,000 |
60,000 |
Direct labor hours |
250,000 |
22,500 |
Engineering hours |
5,000 |
5,000 |
Material moves |
500 |
400 |
Overhead is allocated using a plant-wide rage based on direct labor hours.
Preliminary analysis of costs by Wake Consulting Group revealed that similar costs can be categorized into the following cost pools. Setup costs are costs that occur each time a new production run is made. They involve retooling and reconfiguring the machines and technology. Material handling costs include the equipment and personnel required to transport materials from supplier trucks to the machines. Typically, materials are taken to a storage area before being transported to machines. Each production run will need new materials and materials may also be transported during production runs. Machine costs primarily include depreciation and machine maintenance. Although the machines are depreciated using accelerated depreciation schedules, typically the machine wear out from use and are replaced before they become obsolete. Receiving costs include the costs of clerical and technical help associated with the processing of each order received from a customer. Engineering costs include the technical support staff that implement design changes in the part, manage processes to maintain quality, and provide technical information on the product. The engineering staff maintain a record of the amount of time spent on each product. General plant costs include all the other administrative costs not included in the other cost pools.
Overhead Cost Pools |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Setup costs |
$240,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Material handling costs |
$900,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Machine costs |
$1,750,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receiving costs |
$2,100,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Engineering costs |
$1,500,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General plant costs |
$500,000 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TOTAL : $6,990,000
|
In: Accounting
Coolbrook Company has the following information available for
the past year:
River Division | Stream Division | ||||
Sales revenue | $ | 1,206,000 | $ | 1,805,000 | |
Cost of goods sold and operating expenses | 893,000 | 1,291,000 | |||
Net operating income | $ | 313,000 | $ | 514,000 | |
Average invested assets | $ | 1,090,000 | $ | 1,510,000 | |
The company’s hurdle rate is 7.26 percent.
c. The company invests $253,000 in each division, an amount that generates $116,000 additional income per division
River Division
ROI_______%
Residual income (loss)______
Stream Division
ROI______%
Residual Income (loss)_______
d. Coolbrook changes its hurdle rate to 5.26 percent.
River Division
ROI_____%
Residual Income (loss)_______
Stream Division
ROI______%
Residual Income (loss)________
In: Accounting
Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:
Hi-Tek Manufacturing Inc. Income Statement |
|||
Sales | $ | 1,704,000 | |
Cost of goods sold | 1,250,524 | ||
Gross margin | 453,476 | ||
Selling and administrative expenses | 630,000 | ||
Net operating loss | $ | (176,524 | ) |
Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:
B300 | T500 | Total | ||||
Direct materials | $ | 400,200 | $ | 162,900 | $ | 563,100 |
Direct labor | $ | 120,700 | $ | 42,700 | 163,400 | |
Manufacturing overhead | 524,024 | |||||
Cost of goods sold | $ | 1,250,524 | ||||
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $55,000 and $101,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:
Manufacturing Overhead |
Activity | |||||
Activity Cost Pool (and Activity Measure) | B300 | T500 | Total | |||
Machining (machine-hours) | $ | 205,824 | 90,800 | 62,800 | 153,600 | |
Setups (setup hours) | 156,200 | 75 | 280 | 355 | ||
Product-sustaining (number of products) | 102,000 | 1 | 1 | 2 | ||
Other (organization-sustaining costs) | 60,000 | NA | NA | NA | ||
Total manufacturing overhead cost | $ | 524,024 | ||||
Required:
1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.
2. Compute the product margins for B300 and T500 under the activity-based costing system.
3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.
In: Accounting
X company has the following information concerning the 2 products that it sells.
Product 1 | Product 2 | |||
Sales Price per unit |
$800 | $300 | ||
Variable cost per unit | $500 | $200 |
The company sells 12 units of Product 2 for each unit of Product 1 that it sells. How many units of Product 2 must it sell to breakeven if fixed costs total $75,000?
In: Accounting
On January 1, 2017, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,789,900 in cash. The price paid was proportionate to Sellinger’s total fair value, although at the acquisition date, Sellinger had a total book value of $2,250,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellinger’s accounting records by $297,000. On January 1, 2018, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $665,625 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger.
During the two years following the acquisition, Sellinger reported the following net income and dividends:
2017 | 2018 | |||||
Net income | $ | 465,000 | $ | 577,000 | ||
Dividends declared | 150,000 | 190,000 | ||||
Show Palka’s journal entry to record its January 1, 2018, acquisition of an additional 25 percent ownership of Sellinger Company shares.
Prepare a schedule showing Palka’s December 31, 2018, equity method balance for its Investment in Sellinger account.
In: Accounting
Describe the four financial statements. Discuss the purpose of each financial statement and how one financial statement is related to the other.
please use a different answer than what's on the Chegg database and type out instead of writing for easy reading, thank you!
In: Accounting